Q4 2026 Trellidor Holdings Ltd Earnings Call
Speaker #1: Thank you to all the shielders and investors for attending today's webinar. We are joined by Damien Judge, who, while being a very familiar face, is appearing today in his capacity as the new Trellidor Group CEO.
Speaker #1: As well as by, dare I say, a much prettier face, Jennifer Erasmus, the new Trellidor Group CFO. Damien will start with an operational overview of the group, which will be followed by Jennifer's presentation of the financial results for the year.
Speaker #1: After the presentation, Damien and Jen will be available to take your questions, which you can submit on the Q&A tab on the Zoom platform.
Speaker #1: As always, a copy and recording of this presentation will be made available on Trellidor's website. With all of that, I'm going to hand over to Damien to start us off.
Speaker #2: Thanks, Vera, and also thanks to you and your team for hosting another webinar today. It's greatly appreciated. Good morning, everyone. and welcome to the Trellidor 2026 financial results presentation.
Speaker #2: As highlighted by the trading statement, we released on the 21st of August, our performance for the 2026 financial year has been disappointing, to say the least.
Speaker #2: Although we did see an improvement in our revenue deficit against prior year through H2, it wasn't enough to adequately recover the cost base we started the year with.
Speaker #2: Recognizing that changes have to be made, if we are to restore profitability, we have taken decisive steps to simplify our structure, reset the cost base, strengthen the balance sheet, and reposition the business for sustainable growth.
Speaker #2: The disposal of Taylor and NMC has been completed, our debt has been reduced by 21.6 million, and we reduced our cost base by 16.8 million going into 2027.
Speaker #2: Growth initiatives implemented through the year are gaining momentum, with additional growth initiatives being piloted through H1 of 2027.
Speaker #3: If we look to put 2026 into context, there's really three areas of focus that I'd like to unpack. The first is that, yes, market and trading pressure continues.
Speaker #3: There is weaker consumer demand in South Africa, specifically for us, we've seen that in Gauteng and the Eastern Cape, which have their own macroeconomic challenges putting pressure on consumer spend.
Speaker #3: And these two areas specifically are historically large contributors to the South African revenue base. In addition, we've had to adjust our revenue levels to the normalized post-project levels of the UK, with a higher cost base, which was carried through.
Speaker #3: Ghana, unfortunately, underperformed, which is our largest contributor in Africa from a franchise perspective. In addition, the economic challenges of Botswana have also hindered revenue growth.
Speaker #3: However, market and trading pressures will continue, and there will always be elements within the business that are under pressure at different times. Therefore, it's more important to focus on how have we responded as a management team, and how have we set the business up going into 2027.
Speaker #3: So, as we've mentioned, we've completed our disposal program of our subsidiaries, and we have a much more simplified portfolio to focus on. Our debt has reduced, and our funding burden lowered.
Speaker #3: Our fixed cost base has also been reset. This allows us, as a team, to restructure management focus to look at our operating platform centered around Trellidor.
Speaker #3: We have a lower cost base and lower finance costs, and available facilities and liquidity headroom as we look to build into 2027.
Speaker #2: As explained, entering into 2027, we have a Trellidor-focused structure. With our Durban-based manufacturing facility as the central platform, the management team has been restructured to concentrate on delivering our increased product offering to a growing franchise and distributor network in RSA and the rest of Africa.
Speaker #2: Servicing our growing retail chain-based customer base in the UK, and increasing our non-residential B2B sales channel both in South Africa and the rest of Africa.
Speaker #3: As highlighted earlier, consumer weakness continues to hinder growth for Trellidor, specifically in South Africa. This is largely due to the fact that we have been highly concentrated in the residential space from a customer perspective.
Speaker #3: Recognizing this, we have been working hard to diversify our risk and our product offering into the B2B space. In a difficult trading environment, it is pleasing to report that growing demand for the brand in this non-residential market has shown growth.
Speaker #3: Sales to commercial, retail, and industrial customers increased 13.6% year on year, with momentum continuing into 2027. We've introduced industrial-focused products through 2026, which is assisted in gaining this traction, with additional product offerings on the horizon looking ahead in the coming months.
Speaker #2: The urbanization landscape across South Africa and the rest of Africa continues to evolve, and it is important that our physical store footprint and our underground selling capacity adapt accordingly.
Speaker #2: During the year, we've onboarded 17 additional store locations, what we're calling spokes, with selling capacity in South Africa. This supports our 49 established franchise locations as hubs.
Speaker #2: This additional reach in targeted urbanized areas will support incremental sales growth through the franchise channel through 2027.
Speaker #3: Over and above our business-to-business sales channel, which is gaining nice momentum as we head into 2027, as well as the increased distribution network through our hub and spoke model, the management team which has now focused on Trellidor has a number of opportunities that will support top-line growth and profitability without having to recreate a new platform.
Speaker #3: We have extensive manufacturing capabilities and capacity, that can be leveraged and we have one of the best distribution specification and installation networks in the built environments that can support it.
Speaker #3: This coupled with a brand that has equity with customers means that we're well placed to drive growth, to spark the current market conditions. With our focus squarely on improving profitability, we have started 2027 with lower debt levels and reduced finance and operating costs to stabilize the base.
Speaker #3: Growth initiatives implemented through 2026 are gaining traction into 2027, in particular our business-to-business sales channel. In addition, pilot projects will be completed through H1 2027 that will leverage our existing operational structure and brand equity, with limited capital priorities to further enhance revenue growth opportunities into H2 2027.
Speaker #3: While 2026 was extremely disappointing in terms of the financial performance, significant management and operational changes have been implemented to take us forward.
Speaker #2: I would now like to take the opportunity to formally introduce you to Jennifer Erasmus, our new CFO, who will take you through the year that was from a financial perspective.
Speaker #2: Over to you, Jen.
Speaker #4: Thank you, Damien. Good morning, everyone, and thank you for joining us today. 2026 was a difficult transitional year for the business. The completion of the non-recurring UK project continued weakness in South African demand and timing of cost reduction initiatives materially affected profitability and cash generation.
Speaker #4: Revenue declined by 20.3% to 292.7 million, primarily reflecting the completion of the non-recurring UK project work, which we completed in February 2025, and weaker domestic trading.
Speaker #4: We did see encouraging growth in KZN, the free state, and the Western Cape, however this was offset by halting and the Eastern Cape. The lower revenue and under-recovery of the fixed cost base resulted in an operating loss of 11.1 million, with EBITDA remaining marginally positive at half a million.
Speaker #4: Despite the loss and dividend paid, net asset value remained relatively resilient at 162 cents per share, supported by the property revaluation. Cash generated from operations was broadly break-even, at 0.4 million, before interest and tax, while the resulting cash outflows increased the net debt to 56.8 million.
Speaker #4: The revenue mix shifted back to the core South African business, following completion of the UK project, which contributed 56 million to the prior year revenue.
Speaker #4: South Africa represented 68.5% of the total revenue, the rest of Africa increased to 16.7%, and the rest of the world reduced to 14.8%. The 2026 attributable loss reduced to 16.1 million, from a loss of 39.7 million in 2025, as the prior year included significant non-cash impairments.
Speaker #4: Headline earnings provides a clearer view of the operating performance of the group, which moved from headline earnings of 29.9 million to a headline loss of 16.4 million, resulting in a headline loss of 17.3 cents per share.
Speaker #4: Looking at the balance sheet, interest-bearing debt reduced from 66.2 million to 44.6 million, continuing the group's progress in reducing the term debt. Despite this improvement in gross debt, net debt increased because of the weaker cash position and negative cash generation during the year.
Speaker #4: The balance sheet remains conservatively geared, with debt representing 29% of equity. The property revaluation providing a more current reflection of the group's underlying property values.
Speaker #4: Although this is a non-cash movement and does not alter our focus on restoring earnings and free cash flow, working capital remained tightly managed despite the difficult trading environment.
Speaker #4: Receivables reduced from 39.1 million to 34.6 million, inventory increased from 15.5.9 million to 64.1 million, and trade payables remained relatively stable. The year-end inventory balance reflects a timing difference as we had 2.6 million goods in transit and 8 million in work in progress and finished goods, awaiting completion and delivery.
Speaker #4: These have subsequently converted to sales and a corresponding release of working capital. Cash flow weakened materially in 2026, with cash used in operations of 15.3 million after 3 million in capex, free cash flow was negative 18.2 million, or 25.5 million after lease repayments.
Speaker #4: The result reflects a headline loss and working capital absorption partially offset by lower capex and other investing cash flows. Restoring positive operating cash flow is therefore essential 2027 priority, supported by a lower cost base inventory reduction and stronger collections.
Speaker #4: Thank you again for joining us, and back to you, Vera, and the PSG team for the Q&A session.
Speaker #1: Thanks, Damien, and Jen. Just looking at the questions Q&A bar, no questions so far, but participants, please feel free to type your questions in the Q&A function at the bottom of the Zoom platform.
Speaker #1: We're going to give it a couple of minutes, but as always, if there are any questions, please always feel free to send those via email, to ourselves at PSG Capital, or to Trellidor themselves, and they will respond to those as soon as possible.
Speaker #1: It doesn't seem that anyone has got questions this morning, so thank you, thank you very much. And again, thank you, Damien, and Jennifer, for joining us.
Speaker #1: We're always appreciate your time, and we will do it again in six months. There we go. Just before we hang up, thanks. So the first question is from Charles Bowles, and he asks whether there is any higher specification in the commercial space.
Speaker #2: Thanks, Charles. It depends on location. So in the UK, for example, the specification is higher, in the UK they talk to insurance specification or insurance certified product.
Speaker #2: In South Africa, that has a very different meaning. It's fairly low entry point. It means one additional locking points on an opening, effectively. But in the UK, that speaks specifically to LPCB certified rating, so an independent certification for loss prevention on that product.
Speaker #2: So in the UK, fortunately, we do have those products. We've got about nine products that are certified for loss prevention across the retractables, roller shutter, and Aluva shutter, which is the only one globally that's got a certification rating.
Speaker #2: So we do, we generally cover the sort of full range from the highest spec in terms of the commercial space down into your entry level.
Speaker #2: One of the newer products that we introduced now in March to support that commercial space here in South Africa specifically is a steel roller shutter.
Speaker #2: So we've always been very strong on the aluminium roller shutter space. So we've now introduced our steel roller shutter, which is grain engage momentum and is a fairly popular product in that industrial space in South Africa.
Speaker #2: With additional opportunities on the horizon with some product development currently underway.
Speaker #1: Thanks, Damien. Next question is from Sepo, who asks whether it's possible to get a clean segmental update on the results statement.
Speaker #2: In terms of, I think post the unwinding or tailoring NMC, our segments become very simplified in that it's really just the Trellidor business, which incorporates the entities that are highlighted on the slide base, being the factory producing the goods and then servicing either our corporate-owned branches in South Africa, Ghana, and the UK, or the franchise network as a whole.
Speaker #2: And with the other segment being our holding entity, which is effectively the investment business with the debt and loan facilities and property facilities. Obviously, going forward, if we evolve the product offering, that segment will take additional shape.
Speaker #2: And then further down, we do split out the revenue by geographics, which is really highlighting where RSA, Africa, and the UK play. We obviously used to have decorative as an option or a different segment in our reports previously, but that was more driven around the NMC and tailored goods.
Speaker #2: So that's no longer part. So it is as detailed as it can be at the moment, but if there's anything additional you would like to share with us or request, then we can pop it through, like Vera said, on email, and we can look at that.
Speaker #1: Perfect. Yeah. So Sepo, as mentioned, please feel free to email any further queries directly to Trellidor or to ourselves. All right. Next one is an anonymous question, which asks, in the FY25 chairman, said that they need to introduce a shareholder of reference to assist and support the future development of the business.
Speaker #1: Question is, what happened to that plan?
Speaker #2: Thanks, anonymous. The plan continues. It obviously is not as easy as finding those individuals. Our share register is fairly spread. We've been focused on the debt and the balance sheet for now as phase one of that process, which has been now complete.
Speaker #2: Phase two of that strategy that the chairman spoke to really centered around restoring profitability and top-line growth. So that's underway. And then the last point would be the shareholder of reference, which is an ongoing process.
Speaker #1: Thanks, Damien. Another anonymous question asking whether it's possible to provide details on how the remuneration of executives are linked to the restoration of FCS and profitability.
Speaker #2: Thanks, anonymous. Yes, the remuneration policy, which will obviously be circulated going forward with the AGM notice, which is due out sort of middle of October.
Speaker #2: That will give clear clarity on the adjusted remuneration strategy for the executives. And it's closely linked to profitability and profitability in this business will generate free cash flow.
Speaker #2: So if we can fix the profitability, the free cash flow will come through with that as well. But yes, all the executives are very much aligned from an SDR perspective on restoring profitability.
Speaker #1: Yeah. Then the next few questions, I'm just going to group together. It's one from anonymous and one from Charles, which asks, does it make sense for the group to remain listed considering its size and the costs associated with being listed?
Speaker #1: And then Charles also asks whether Trellidor would benefit from being unlisted with this enabled the business to be more nimble and cost efficient.
Speaker #2: No, thanks, guys. I think since I've been with the business, it's always been the question. We do struggle being not even a micro cap, but I'd say it's more of a nano cap in some currencies.
Speaker #2: And it is the situation that we find ourselves in. And we will continue to execute our strategies and grow the business regardless of our ownership structure.
Speaker #2: We don't we try and limit our overheads from a listing cost base to as low as possible. And really, from a management team focus, with support of the non-executives, which I think has been really positive from a shareholder and investor relations perspective, we have got the space to focus operationally on the business.
Speaker #2: So for us as a team internally, ownership really, it does play a part, but it doesn't change our strategy and our ambition to grow this business profitability.
Speaker #2: But as we know, if there are interests of trying to make an offer the board will continue on its normal process in the best interest of shareholders.
Speaker #1: Thanks, Damien. The next anonymous question asks, I think I'm interpreting correctly, you're saying, given our competitive in the UK market is the question is, why not dispose of that business?
Speaker #2: Thanks, anonymous. The UK is competitive. Well, it is competitive, but it also is struggling, like I think most countries globally with economic pressures. And that's really been the bigger hindrance there.
Speaker #2: For a long time, pre this project work, and I know the project work has been very distracting in our numbers, but even pre that, the business was comfortably profitable.
Speaker #2: It is geared to be a high-margin, low-cost-based business. Obviously, with the project work that came on, we had to execute on a very significant amount of sales volume, and therefore needed to increase our headcount to execute that project successfully.
Speaker #2: And that was extremely profitable for us. We are now working through that hangover, which has largely been corrected. And we're getting back into that niche market where we still have a really, really strong name in the retail sort of store chain store market.
Speaker #2: We continue to add new customers to that base. Like most people, most countries, we struggle with good quality products and good service. And as a Trellidor brand, that's the area that we focus on, providing quality service.
Speaker #2: And that is a niche. In the UK, so we continue to grow. We've got line of sight of profitability returning. And I think the nice part about that business is that because we own it as a corporate-owned store, we will get the full length of the margin when that comes through.
Speaker #2: So you're not just dealing with the volume and profitability coming out of the factory. It's also the end margin that comes through. So the board will review strategies with our corporate-owned stores every meeting.
Speaker #2: We have a look at those on a quarterly basis. But for now, we continue with the strategy that we see potential in the UK.
Speaker #2: And profitability is on the horizon.
Speaker #1: Thanks, Damien. Roger Walters asks whether the business is EBIT positive as of today.
Speaker #2: I'll be guided by my sponsors on how much I can say.
Speaker #1: Yeah. Today's date that we're not giving profit forecasts.
Speaker #2: But I can confirm we have had a very positive start to the new year. And the momentum and order book is healthy going forward.
Speaker #1: Thanks so much, Damien. You see, when you've got the police men on the same Q&A session, then it limits what you're able to say.
Speaker #1: Roger and everybody else, feel free, as I said, if you've got specific queries, to kind of also elaborate and ask those on email, and we can kind of see to what extent we can give you further insight.
Speaker #1: Last question for now, but having seen how I almost jumped the gun and thought there were no questions, please continue to post them if you have any.
Speaker #1: But last question for now is from Charles again, who asks, can you give us some insight into the performance of the corporate branches versus the franchisees?
Speaker #1: And tell us how you think about your channel to market going forward.
Speaker #2: Thanks, Charles. I think if I look back into F26, the performance of the branches reflected the specific regional performances that Jen coffee now. Highlights are just now regarding KwaZulu-Natal and Cape Town.
Speaker #2: So we have two strong branches in those areas, and they outperformed prior year. In line with the rest of the regions. Our Khao Tieng branch, unfortunately, also followed trend with the rest of the franchises and struggled in Khao Tieng specifically.
Speaker #2: But we know that there's pressure on service delivery in that area, and we've seen historically when for example, in Cape Town, when we had day zero, all the spend and focus securing water for housing and very little went into anything else.
Speaker #2: And I think we're seeing something similar in Khao Tieng at the moment with the lack of service delivery. As well as the property pricing being where it is at the moment.
Speaker #2: So those trends followed very similar. Durban outperformed the rest of the KZN branches from a top-line growth perspective year on year. And similarly, the Cape Town branch.
Speaker #2: So very comfortable there. Khao Tieng is our focus area. And in terms of the platform going forward, which is a good sort of segue into looking into 2027, having these branches available and I mentioned in the call about pilot projects of additional growth initiatives, because we have these branches available to us, they become the perfect avenue for us to test the markets with these growth initiatives.
Speaker #2: So in terms of the pilot projects that we're working through, both of those the Cape Town and the Durban branches, will be our pilot projects on those issues, on those initiatives.
Speaker #2: And then post-successful implementation there, it gives us a platform to roll out to the rest of the franchise network.
Speaker #1: Fantastic. Thanks. Thanks, Damien. Another anonymous question, which asks, does management consider doing share buybacks? Given the levels that the shares currently trading.
Speaker #2: Thanks, anonymous. I think cash availability is key first. So as Jen mentioned, free cash flow generation, getting back to those levels. Profitability is important.
Speaker #2: So we need to see that first. And once that comes back as every half year and full year report at our board meeting, the board will consider the best way to give back value to shareholders, given the financial performance.
Speaker #1: Then a very interesting question from Sefo, who asks, whether there is an option or an interest to expand towards the cybersecurity market. Don't know if you've given that any thought, Damien.
Speaker #2: Sefo, thanks very much. I think with the strength of the brand and the security space, often these questions do come through. Not even just cybersecurity, but your general sort of digital alarms, et cetera, et cetera.
Speaker #2: And I think from us as a business perspective, where we are right now is cash generation hasn't been great. We've just sort of simplified our business from a subsidiary perspective.
Speaker #2: So we rarely are focused on utilizing the existing strengths and manufacturing capabilities within the business as our focus area to see opportunities. And then look to see where we can expand post that.
Speaker #2: Because unfortunately, I would say that in this space, cybersecurity would probably have to look at an acquisition. And I think our investors might agree that we're a little bit still too soon for to consider acquisitions considering where we've just come from.
Speaker #2: So at the moment, our focus is on utilizing the excess capacity in our factory and leveraging off the skill sets within our franchise network.
Speaker #1: Yeah, absolutely. Where there's barriers to entry as opposed to the cybersecurity space, which doesn't need to set up a factory, Damien. I'm going to give it another couple of minutes to just see whether there are any final questions.
Speaker #1: But it doesn't seem to appear. So yeah, thanks once again for the team, for your availability. And just to all investors and shareholders who've joined today, thank you very, very much.
Speaker #1: But as always, the team is always available to answer questions and feel free to send those through to us. We appreciate everyone's time. Thanks so very much.
